Mexico GDP

Mexico: Economic growth picks up speed in Q4

February 20, 2015

At the end of 2014, Mexico’s economy continued to gain momentum gradually due to healthy growth in services and solid growth in construction and manufacturing. GDP in Q4 increased 2.6% over the same quarter of the previous year. The reading represented a mild acceleration over the 2.2% increase tallied in Q3 but fell short of the 2.7% rise the markets had expected.

Q4’s acceleration reflected faster growth in the industrial sector (Q4: +2.4% year-on-year; Q3: 2.0% yoy), buttressed by meaningful growth in manufacturing (Q4: +4.6% yoy; Q3: +3.3% yoy) and construction (Q4: +5.9% yoy; Q3: +3.7% yoy). On a negative note, weakness in the mining sector was a drag on growth in the industrial sector. Services picked up momentum, with growth rising to 2.9% in Q4 from 2.1% in Q3. Conversely, agriculture slowed down sharply in Q4, from a 6.8% increase in Q3 to a 1.1% expansion.

On a sequential basis, GDP increased a seasonally-adjusted 0.7% in Q4 over the previous quarter, which came in above the 0.5% rise observed in Q3, confirming the acceleration suggested by the annual data.

Mexico’s gross domestic product increased 2.1% in 2014, which came in above the 1.4% expansion observed in 2013. Mexico’s Central Bank (Banxico) revised Mexico’s growth forecasts and now expects the economy to grow between 2.5% and 3.5% in 2015 (previous estimate: between 3.0% and 4.0%). For 2016, the Bank also lowered its projections and now sees the economy growing between 2.9% and 3.9% (previous estimate: between 3.2% and 4.2%).

LatinFocus Consensus Forecast panelists expect the economy to increase 3.2% in 2015, which is down 0.1 percentage points from last month’s forecast. For 2016, the panel expects growth to pick up to 3.7%.

Author:Ricardo Aceves, Senior Economist

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Sentiment among Mexican consumers deteriorated in January as uncertainty surrounding both NAFTA negotiations and upcoming domestic elections seemingly outweighed the effects of a tighter labor market and softer inflation.